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Vision RNG, a developer of US RNG projects, could see its next project reach commercial operations in Tennessee in a line of projects in southeastern and mid-western states, CEO Bill Johnson said in an interview.

Vision Ridge Partners, a private equity firm, is the majority owner of the company. Management owns the remaining minority stake.

The company is still in early stages and would likely need to get something like six projects to COD before a liquidity event.

“Locking down projects creates a lot of value,” Johnson said, noting that Vision Ridge will likely follow a typical private equity monetization pattern.

The company’s project at Meridian Waste’s Eagle Ridge Landfill in Bowling Green, Missouri is fully operational. It uses 1,500 scfm of landfill gas (LFG) and produces 375,000 MMBtu of RNG annually.

That mid-sized project is similar in scale to what is being developed in Tennessee, which will likely be the next project to reach COD, Johnson said, declining to provide details on exact location.

“We’re working on developing other opportunities with some of the largest publicly owned landfill companies in the country,” Johnson said.

Projects require between $20m and $60m in capex, ranging from small to large, Johnson said. Vision Ridge takes care of the company’s equity requirements.

Debt options are being considered on a project-by-project basis, he said. Debt tends to range from 50% to 70% of total spend.
“We’ll look to put reasonable project debt on these,” he said.

Vision has not to date retained the services of an investment bank, Johnson said.

Vision is pursuing opportunities in Kentucky, Alabama, South Carolina and Oklahoma, and will evaluate suppliers of services and equipment for each. The location-agnostic company is also open to new relationships with potential future financial and strategic acquirers.

“If you are a private equity group, you’re a potential buyer of the company at some point, so we would be happy to know them and keep their interest in us up,” Johnson said. An acquirer would not necessarily need to have expertise in RNG.

M&A potential

M&A of projects is an option on the table, Johnson said. But returns are better if Vision develops its own projects; and a more challenging macroeconomic environment makes acquisitions somewhat unlikely.

“With the market premiums being paid, I see us continuing to keep our head down and focusing on organic growth,” Johnson said.

Johnson said he expects to see continued consolidation in the greater market. Many large strategic and midstream companies have yet to make significant buys in RNG.

He pointed to bp’s acquisition of Archaea Energy as a significant milestone in the RNG market.

“There’s quite a number of potential acquirers,” Johnson said. “The market is kind of fundamentally and always will be under-supplied and over-demanded.”

Vision would potentially be open to a merger with a portfolio company of a strategic or PE investor, Johnson said.